$8 Billion in NFC Volume Expected This Year, $30B in 2012

Juniper Research predicts the value of NFC transactions will reach $8 billion this year and grow to $30 billion in three years. Coupon and promotion applications are expected to be prominent in the early market, but eventually will be supplanted by contactless payment.

September 9, 2009—The value of mobile transactions conducted with near field communication (NFC) technology will reach $8 billion this year and grow to $30 billion by 2012, according to a report released last week by UK market research firm Juniper Research. Mobile marketing and retail coupon applications will account for most transactions in the near term, before mobile payment and other commerce applications become dominant.

"There is strong potential for NFC coupons and posters to change the way we shop in the near future. One shouldn't overlook the opportunity there," Howard Wilcox, author of Juniper's NFC Mobile Payments & Markets 2009 - 2014 report, told RFID Update. "Payments no doubt will become the lion's share of revenues associated with NFC, but the whole area of coupons and posters is very interesting and provides merchants an opportunity to get fast feedback on their promotions."

Juniper and NFC technology developers envision applications where consumers might tap their NFC-enabled cell phones to an NFC-enabled movie poster to download a viewable trailer and buy tickets to the movie, or interact with advertising or other promotional materials to get coupons or special offers. Wilcox said Nokia is due to commercially ship the first NFC-enabled phone by the end of this year, and other manufacturers are expected to follow.

"The clear readout from industry analysis is that NFC is going to be a default feature of phones in the future, much like Bluetooth is now," Wilcox said.

While the phone market develops, early NFC adopters will use stickers and SD cards. "Interim technologies provide an opportunity for people who don't want to wait to buy or upgrade to an NFC phone to get started with the technology sooner," Wilcox said. "To some extent it's a chicken-and-egg situation, in that there's not going to be much demand for NFC phones until there are NFC services."

Despite the current lack of NFC phones, Wilcox is not overly concerned that technology or standards issues will undermine NFC adoption. Instead, consumer awareness and acceptance of the technology, and relationships between retailers, payment processors, network providers and other stakeholders in the NFC ecosystem, will be the biggest issues to address to facilitate adoption.

"The person on the street needs to understand the potential of NFC technology, be convinced of its security, and be 'incentivized' to change their behavior. These issues haven't been a problem in NFC trials," Wilcox said. "There are uncertainties in the NFC business model, however. If the partners can't agree on how the cake should be sliced up, there won't be many services launched."

The NFC industry is making progress on these fronts. Just last week NFC Forum, an industry association, and Mobey Forum, a payment industry organization, announced they would collaborate on standards development. Meanwhile, two commercial companies launched TagAge, a new service to create customized NFC-enabled posters, labels and other printed material for promotions and other applications (see our news roundup for more information).

"If you look at what's happened in NFC in the last year or so, there's been tremendous progress in the technology and standards areas. There have also been marketing campaigns by banks and payment companies to promote contactless payment," said Wilcox. "There are many pilots going on right now, and we expect many of them to go commercial."